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November 1, 2011

One piece of advice offered by Jim Collins and Morten T. Hansen in Great by Choice is to avoid making a big bet on one innovation that ends up wasting your energy and your resources. Collins and Hansen observed that great companies fire bullets first, then cannonballs.

The analogy at work here is that if you are on a warship at sea fighting another ship – and you have limited gunpowder – it is better to fire a few bullets first to calibrate your shot. This way, you can determine the correct firing range and increase the odds of success with your larger cannonball shot.

The business research conducted for Great by Choice demonstrates that great companies obtained a 69 percent calibration rate on their “cannonballs” versus 22 percent for the comparison companies. Would you like to increase your odds by a 47 percent margin? What does a bullet look like in a business context?

Collins and Hansen determined that a bullet is an empirical test aimed at learning about what works, meeting three criteria:

Low cost. Cost is relative; one company’s million-dollar cannonball can be a larger company’s bullet.

Low risk. Low risk equates to minimal consequences, not a sure-fire path to success; whether or not a bullet will be successful has yet to be determined.

Low distraction. It doesn’t divert attention of the overall organization; it impacts only one or a few.

Eric Ries sharpens the focus on this empirical learning process in his book, The Lean Startup. Ries argues that validated learning is a rigorous process whereby a company demonstrates:

Progress as it charts a course through uncertain territory.

That it has discovered truths about present and future business prospects.

Ries points out that in the lean startup context, this empirical process is actually a series of experiments designed to learn how to build a sustainable business. What you need, Ries says, is to generate feedback and data from these potential customers as quickly as possible. This feedback is on two dimensions:

Qualitative: what customers like and don’t like.

Quantitative: how many people use it and find it valuable.

To accomplish this, The Lean Startup advocates using similar low cost, low risk, low distraction criteria outlined in Great by Choice by creating a minimum viable product (MVP) – a version of a new product that allows you to obtain validated learning about customers with the least amount of effort expended. This isn’t the same thing as building a minimal product designed for a quick flip; in fact, building an MVP will most likely add to your overhead in the long term.

A minimum viable product can be something as simple as a prototype or some minimalist implementation that allows you to start the process of learning from your potential customers as early as possible. Consider the story of Andrew Mason, founder of Groupon:

“We took a WordPress Blog and we skinned it to say Groupon and then every day we would do a new post. It was totally ghetto. We would sell T-shirts on the first version of Groupon. We’d say in the write-up, ‘This T-shirt will come in the color red, size large. If you want a different color or size, e-mil that to us.’ We didn’t have a form to add that stuff. It was just cobbled together.”

As you can see, while a minimum viable product helps start the process of learning as quickly as possible, it will most likely lack many features that will prove to be essential later on. The Lean Startup is clear that the goal, “…is to figure out the right thing to build—the thing customers want and will pay for—as quickly as possible.” You can always add other features later, once the idea or concept has proven to be viable.

Ries also make another great observation about how we measure productivity while we are navigating uncertain terrain using validated learning: “Don’t think about productivity in terms of how much stuff we are building but in terms of how much validated learning we’re getting for our efforts.” After all, Ries reminds us, “If we’re building something that nobody wants, it doesn’t much matter if we’re doing it on time and on budget.”

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Ryan Wyatt
said...

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I'm currently an independent agile coach, residing in Portland, Maine. My work experience includes being a developer, a development manager, product manager/chief product owner, and agile coach. This blog is about channeling my passion for business, software development and writing – with an emphasis on agile leadership. The opinions expressed in this blog are my own and do not represent the views of my current or former employers.